Headlines that Matter for Companies and Executives in Regulated Industries
DOJ Makes Good on Promise to Move to Dismiss Whistleblower Complaint Against Gilead
As promised by the US Solicitor General in a Supreme Court amicus brief, DOJ recently moved in federal district court in the Northern District of California for dismissal of a False Claims Act complaint filed by a relator against Gilead Sciences, Inc., under the government’s FCA dismissal authority in 31 U.S.C. § 3730(c)(2)(A).
Following an initial dismissal by the district court in June 2015, the Ninth Circuit reversed in a plaintiff-friendly opinion regarding the FCA’s materiality requirement that drew the attention of the FCA defense bar. See United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890 (9th Cir. 2017). The Ninth Circuit reinstated the relator’s FCA claims against Gilead for allegedly misrepresenting compliance with FDA regulations regarding the manufacture and labeling of certain HIV drugs, resulting in receipt of billions of dollars from the government.
After Gilead asked the Supreme Court to review the Ninth Circuit’s decision, the Solicitor General took the unusual step of filing an amicus brief that offered to move for dismissal of the relator’s claims if the case were remanded back to the district court. The government indicated that it would take this action based in part on the government’s investigation and evaluation of the merits, as well as the potential that FDA would need to engage in burdensome discovery that would distract from its other responsibilities if the case were fully litigated. The Supreme Court declined to review the case in January 2019.
On March 28, 2019, the government filed a motion to dismiss the relator’s complaint, consistent with the Solicitor General’s past representation to the Supreme Court. In its brief, the government argues that it is entitled to dismissal under the standard articulated by the Ninth Circuit in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998), which permits dismissal under § 3730(c)(2)(A) so long as the government has identified a “valid government purpose,” and there is a “rational relationship between dismissal and accomplishment of the purpose.” The government contends that it has a legitimate purpose for dismissal under Sequoia Orange, which is “to avoid the additional expenditure of government resources on a case that it fully investigated and decided not to pursue,” including the costs of monitoring the case and responding to pleadings, Touhy requests, and trial subpoenas.
The relator’s opposition brief is due May 9, 2019, and a hearing has been tentatively set for June 20, 2019.
Public Corruption and Bribery Charges Leveled Against Four, Including North Carolina Political Party Chair
A federal district court in the Western District of North Carolina unsealed an indictment charging the founder and chairman of Eli Global LLC, who also owns Global Bankers Insurance Group; his consultant; the North Carolina Republican Party Chair; and the Chatham County Republican Party Chair with public corruption and bribery for their alleged roles in a scheme involving independent expenditure accounts and improper campaign contributions.
DOJ alleged what it deemed a “brazen bribery scheme” from April 2017 to August 2018 whereby defendants gave, offered, and promised the Commissioner of the North Carolina Department of Insurance millions of dollars in campaign contributions and other things of value in exchange for the removal of an official in the Department who was responsible for overseeing regulation and the periodic examination of a company owned by one of the defendants.
The defendants allegedly used two corporate entities to form an independent expenditure committee with the purpose of supporting the Commissioner’s reelection campaign, and funded the entities with $1.5 million as promised to the Commissioner. The defendants were charged with conspiracy to commit honest services wire fraud, bribery concerning programs receiving federal funds, and aiding and abetting. One defendant was also charged with three counts of making false statements to investigators.
Former Transportation Company CFO Charged with $245 Million Securities and Accounting Fraud Scheme
A federal court in the Eastern District of Wisconsin unsealed a superseding indictment charging a former chief financial officer of a publicly traded transportation company with a $245 million securities and accounting fraud scheme.
The defendant, along with two other defendants who were previously charged, was charged with conspiracy to make false statements to a public company’s accountants and to falsify a public company’s books, records, and accounts; false entries in a public company’s books, records, and accounts; conspiracy to commit securities and wire fraud; securities fraud; and wire fraud, among other charges. The defendants allegedly used sham accounting entries and other means to conceal millions of dollars of bad debt and financial problems from shareholders, regulators, lenders, and the investing public, causing investors to lose more than $240 million.
Micronesian Government Official Pleads Guilty to Money Laundering in Connection with Alleged Bribery Scheme Involving FCPA Violations
A government official from the Federated States of Micronesia pleaded guilty in federal district court in Hawaii to a one-count information charging him with conspiracy to commit money laundering. The defendant was allegedly an official in the FSM Department of Transportation, Communications, and Infrastructure, with authority to administer FSM’s aviation programs, including management of airports.
During the plea hearing, the defendant admitted that, between 2006 and 2016, a Hawaii-based engineering and consulting company paid him and other FSM officials bribes to obtain and retain contracts with the FSM government worth nearly $8 million, in violation of the Foreign Corrupt Practices Act (“FCPA”). The owner of the company previously pleaded guilty to a one-count information charging him with conspiracy to violate the FCPA and to commit federal program fraud.
DOJ Consumer Protection Branch Charges Corporate Executives in First-Ever Criminal Prosecution for Failure to Report Under Consumer Product Safety Act
A federal district court in the Central District of California unsealed an indictment against two corporate executives for their alleged roles in a scheme involving defective and dangerous consumer products. The defendants allegedly received multiple reports that their dehumidifiers were defective, dangerous, and could catch fire, but continued to sell them anyway and failed to disclose these defects to the US Consumer Product Safety Commission, retailers, and insurers, despite knowing that they were required to report the safety issues to CPSC.
The government charged the defendants with conspiracy to commit wire fraud, to fail to furnish information under the Consumer Product Safety Act, and to defraud the CPSC; wire fraud; and failure to furnish information under the CPSA. According to DOJ, the case represents the first time the government has charged a defendant criminally for failing to report safety issues in compliance with the CPSA.
Daniel Levinson, the Inspector General for the Department of Health and Human Services for the past 15 years, reportedly submitted his resignation to the President on April 2, 2019, effective May 31, 2019. HHS-OIG’s mission is to protect the integrity of HHS programs and the health and welfare of program beneficiaries, including by combating fraud, waste, and abuse, and is the largest inspector general office in the federal government, with approximately 1,600 employees. HHS-OIG Principal Deputy Inspector General Joanne Chiedi will be acting Inspector General beginning June 1.